Fintech Company One MobiKwik Slashes Issue Price For Upcoming IPO, New Valuation At Rs 2,165 Crore

MobiKwik, the fintech company founded by Bipin Preet Singh and Upasana Taku, is set to open its initial public offering (IPO) for subscription on Wednesday. The IPO comes with a price band of Rs 265-279 per equity share, valuing the company at approximately Rs 2,165 crore-a reduction from the Rs 7,600 crore valuation sought in its previous IPO attempt in 2021.

This public offer aims to raise Rs 572 crore, slightly down from the Securities and Exchange Board of India's (SEBI) earlier approved Rs 700 crore target. The offering consists entirely of a fresh issue of shares, with no offer-for-sale component.

The decision to lower the valuation and fundraising target stems from a combination of factors, including volatile market conditions and regulatory changes in the fintech sector. "If we had secured SEBI approval earlier, we might have approached the market differently," said Upasana Taku in a Mint interview, referring to the market's bullish run up to August 2023.

During the interview with Mint, Taku also highlighted the impact of recent Reserve Bank of India (RBI) sanctions against fintech players, which influenced MobiKwik's cautious approach. These factors align with broader trends, as a December 3 Axis Capital report notes a slowdown in India's IPO market due to weak sentiment and lacklustre listing performances.

Allocation of IPO Proceeds

MobiKwik, founded in 2009, has strategically planned the use of IPO proceeds to strengthen its core business areas. It plans to use Rs 150 crore for expanding its financial services, which account for 64% of the company's revenue, another Rs 135 crore for the payments business, which makes up 36% of its revenue, and Rs 107 crore for research and development in artificial intelligence (AI), machine learning (ML), and technology innovation. The remaining funds are for capital expenditure on payment devices and general corporate purposes.

Growth Strategy

A key focus for MobiKwik's growth is its innovative approach to the Unified Payments Interface (UPI) market. With products like Pocket UPI and RuPay credit cards linked to UPI, the company is targeting profitable niches rather than chasing a broad market share.

"I'd rather focus on a smaller, lucrative piece of the UPI pie where revenue can be generated," Taku explained. The introduction of interchange fees on UPI wallet transactions and merchant discount rates (MDR) on credit card transactions further supports this strategy.

However, the company faces challenges in its Buy Now Pay Later (BNPL) segment, which has been scaled back due to declining sentiment and cautious partnerships with banks and non-banking financial companies (NBFCs). Despite this, MobiKwik is doubling down on its merchant payments business, acquiring new merchants and enhancing processing capabilities.

Additionally, the company plans to expand its financial services portfolio by growing its insurance and savings verticals, aiming to attract a broader customer base.

Financial Performance

MobiKwik recorded its first-ever net profit of Rs 14 crore in FY24, a remarkable turnaround from the Rs 83.8 crore loss in FY23. Its total income for FY24 surged 59% to Rs 890.32 crore. In the first quarter of FY25, the company generated revenue of Rs 342.2 crore, though it posted a marginal loss of Rs 6.6 crore during the same period.

Market Sentiment

The company's reduced valuation has raised concerns about the impact on its capitalization table. Taku addressed these concerns, stating that while existing investors and promoters are adapting to the lower valuation, the company's performance post-listing could provide an opportunity for reevaluation.

The fintech sector has faced significant regulatory headwinds recently, with the RBI barring instant withdrawal features for peer-to-peer (P2P) exchanges in September. MobiKwik, which operates in this space through Lendbox, was among the companies impacted.